Venezuela economic outlook worsens LatinNews.com

Venezuela economic outlook worsens
http://www.latinnews.com/ldb/LDB22030.asp?instance=2&mode=print
LatinNews.com
LatinNews Daily - 14 April 2010

Development: On 13 April local analysts released grim new forecasts for the Venezuelan economy this year.

Significance: José Guerra, a former senior central bank economist quoted in today’s opposition daily El Universal, notes that the link between oil income and economic output has been broken, due to strong private sector disinvestment (amid a hostile, uncertain atmosphere), and a fall in the volume of oil output. Venezuelan oil is currently fetching about US$70/barrel, but there are signs that despite the recent devaluation the government of President Hugo Chávez will not easily be able to spend its way of the current economic crisis.

Guerra expects real GDP to contract between 7.5% and 8.0% (year-on-year) in the first quarter of 2010, following on from a drop of 5.8% in the fourth quarter of 2009. Luis Vicente León of the market research firm Datanálisis said that the basic goods scarcity index was tipping backwards again, following some improvement in 2009. Datanálisis estimates that shoppers were unable to access the basic basket of essential goods in 17% of all retail outlets at the end of March.

This was up sharply on 8% in March 2009, but is still far from the worst peak of 33% in 2008, León explained. He said that the situation was not critical yet, but noted that the government’s price freezes and its intervention in some key food sectors had exacerbated, rather than ameliorated, supply problems. He said that the recent intervention in food companies run by Ricardo Fernández Barrueco, a businessman and banker formerly allied to the government, had resulted in particular problems for the state-run ‘Mercal’ food store chain, which previously sourced products from Barrueco’s companies.

Guerra noted that total financial sector lending was down 16% year-on-year in real terms in the first quarter. Car production and sales were down 30% and 50% year-on-year respectively, he estimated. Continued dollar shortages for imports and the severe electricity crisis are also taking their toll, he added."

The MasterBlog